Following the severe impact of the Covid-19 pandemic on the travel sector, Virgin Atlantic has made significant progress in safeguarding its future. A court-backed restructure process over the next five years will form part of a solvent recapitalisation of its airline and holiday business which will effectively “keep Virgin Atlantic flying.”
Supported by its shareholders Virgin Group and Delta, new private investors and existing creditors, the new deal will help the airline rebuild its balance sheet and hopefully return to profitability from 2022.
The recapitalisation will deliver a refinancing package worth c.£1.2bn over the next 18 months in addition to cost savings of c.£280m per year and c.£880m rephasing and financing of aircraft deliveries over the next five years.
Shareholders are providing c.£600m in support over the life of The Plan including a £200m investment from Virgin Group, and the deferral of c.£400m of shareholder deferrals and waivers.
Additionally, Davidson Kempner Capital Management LP, a global institutional investment management firm, is also providing £170m of secured financing while creditors will support the airline with over £450m of deferrals.
The airline continues to have the support of credit card acquirers (Merchant Service Providers) Lloyd’s Cardnet and First Data.
To secure approval from all relevant creditors before implementation, the restructuring will go through a court-sanctioned process and it is hoped recapitalisation will come into effect late Summer 2020.
Shai Weiss, CEO, Virgin Atlantic commented: “Few could have predicted the scale of the Covid-19 crisis we have witnessed and undoubtedly, the last six months have been the toughest we have faced in our 36-year history. We have taken painful measures, but we have accomplished what many thought impossible. The solvent recapitalisation of Virgin Atlantic will ensure that we can continue to provide vital connectivity and competition to consumers and businesses in Britain and beyond. We greatly appreciate the support of our shareholders, creditors and new private investors and together, we will ensure that Virgin Atlantic can emerge a sustainably profitable airline, with a healthy balance sheet.
“Once our plan is approved, we will continue to focus on providing our customers with the service they have come to expect. Despite the incredible efforts of our teams, through cancelled flights and delayed refunds we have not lived up to the high standards, we set ourselves, but we will do everything in our power to earn back their trust.
“While we must not underestimate the challenges ahead and the need to continuously respond to this crisis, I know that now, more than ever before, our people are what sets us apart. I have been humbled by their support and unwavering solidarity throughout. The pursuit of our vision continues and that is down to each one of them.”
Earlier this year Virgin Atlantic instigated its “self-help” programme of through Leadership pay cuts and reducing the number of people it employs by 3,550.
It also closed its Gatwick base, “while retaining a slot portfolio at the airport to protect opportunities for future growth” and consolidated to Heathrow and Manchester.
The airline also pointed out that by 2022 it will fly the same number of sectors as 2019 despite its smaller scale. It will also operate a streamlined fleet of 37 twin-engine aircraft following the retirement of 7 x 747s and 4 x A332s by Q1 2022, with rescheduled delivery of outstanding A350s and A339s.
Virgin Atlantic will restart passenger flights from 20th July 2020.